Sarah Elliott
- Partner
- Construction
We set out below the questions asked at our seminar “Building Safety Act In Practice” and our answers to them. For further information please visit Wedlake Bell construction team insights on our BSA microsite, which covers many topics: Building Safety Act 2022 – Wedlake Bell. We also commend the FAQ Explainer on the HSE website which answers questions about the Building Safety Regulator (BSR) as the Building Control Authority for Higher Risk Buildings (HRBs): The Building Control Authority – Making Buildings Safer.
How does the piercing of the of the corporate veil deal with SPV’s and offshore/foreign entities?
It has long been a principle of English law that if a limited company is a party to a contract, only that company and not other associated and separate companies can be held liable for any contractual wrongdoing. The BSA upends that by providing that Remediation Contributions Orders (s124) and Building Liability Orders (s130) can be made against associated parties. This includes associated companies of SPV’s and foreign/offshore entities. See Natalie Pilagos’ article on the Wedlake Bell BSA microsite: When will it be just and equitable to make a Remediation Contribution Order under Section 124 of the Building Safety Act 2022?
Given extensive delays, could a developer notify the regulator that they have waited in excess of the statutory period for approval and are going to commence?
The short answer is no. Even if the delays are caused by the BSR and the applicant has submitted a valid application in accordance with the statutory requirements. Without Gateway 2 (G2) approval, the BSR would be able to take enforcement action including issuing a stop notice to cease work on site and failure to comply with that would be a criminal offence which may result in prosecution.
Does the difficulty in submitting a G2 HRB application, response times, programme delays etc. promote ‘corner cutting’ in practice?
If there is a temptation to cut corners, doing so will be short sighted. Not only will the developer (and his professional team) be opening themselves up to enforcement action and committing an offence but the subsequent occupation of any residential unit will be illegal.
This is likely to affect insurance and any sale/letting in the future.
How does the system work with contractor design when the main contractor takes over a project which hasn’t been fully designed and how is a change in PD dealt with D&B post tender?
For an application relating to works on an HRB, the design must be sufficiently progressed to comply with the G2 application requirements (generally thought to equate to RIBA stage 4). This is leading to contractors being involved earlier in the design process, often by way of a Pre-Construction Services Agreement (PCSA). When a building contract is then entered into the design consultants and the BSA Principal Designer (BSA PD) can be novated to the contractor, if that is agreed. If there is a change of the BSA PD at any time up to Gateway 3 completion the BSR needs to be notified.
How do Contracts / Employer’s Requirements need to adapt to ensure the BSA is properly considered?
This is not capable of a short answer and will depend on the project. However, for example, JCT 2024 contracts deal with the BSA with a very light touch and do not have any provisions which expressly deal with HRB requirements. There is a general obligation to comply with Statutory Requirements but not much more. Until market standard amendments become generally acceptable it is therefore necessary for contractual parties to negotiate how and by whom the programme, cost, and other risks of BSA compliance will be borne. They may also wish to set out in the programme what needs to be done and when to meet BSA requirements.
Traditional or Design and Build? Is there going to be a new hybrid procurement solution generated out of this legislation? Are there models from abroad as examples?
New procurement models may well evolve as a result of the BSA, but it is too early to tell what they may be. Some commentators predict the death of Design and Build (or at least in the form that has been common in the market up to now sometimes called Design and Dump!). Design and Build with a preceding PCSA, as referred to above, may become more common with processes such as two stage tendering injecting competition. Others predict the re-emergence of construction management or management contracting. There may well be procurement lessons to be learned from other jurisdictions which have their own building safety issues to deal with.
Does an office fit out (Cat B) in an HRB have to go through the Gateway 2 process e.g. a fit out on the 17th floor of the Shard costing £1m?
Yes, if the building comes within the definition of an HRB. It will not have to go through the gateway process if the building is not an HRB, but the works will still have to comply with the new building control regulatory frame work. The value of the work is immaterial. Even on small projects enough information will need to be provided to the building control authority to demonstrate that the work will comply with the relevant building regulations and how. Whether the works are in an HRB or not, there will have to be a BSA Principal Designer and BSA Principal Contractor and the Employer will have to be satisfied as to their competence and otherwise comply with the new building control regime.
Could we get to a stage whereby developers just stop building HRBs, at least for a while? If so, how does that impact urban density and housing targets?
This is an obvious concern, particularly in the light of the Government’s ambitious housing plans. The current delays and uncertainties in the gateway process are of particular concern, as well as the resourcing issues referred to below. In the short/medium term there may well be a switch to lower rise residential development, although one of the recommendations of the recent Grenfell 2 report was a change to the HRB definition. If that happens the HRB processes may apply to a wider variety of residential works. The BSA is here to stay so in time the industry and its funders will have to get to grips with the new regime.
What about refurb work in HRB hospitals or care homes, do I need to wait for my G3 completion certificate before I can start using that bit of the building again?
No. The BSR has now issued guidance on this: see BSR FAQ Explainer referred to in the opening paragraph above. Essentially a Gateway 3 completion certificate must be applied for but the refurbished area can be occupied without committing an offence whilst waiting for the certificate.
Is there a concern that there may be a shortage not only of building inspectors and professional consultants who meet the necessary BSA competence requirements but also that certain trades will be affected?
Yes, the requirement for competence and for the registered building control approver/BSR and an employer to be satisfied about the competence of those they engage, has raised the concern that many experienced professionals and trade contractors may decide to retire/do something else rather than seek independent verification and registration. There is already a shortage of Registered Building Inspectors to deal with the more complex developments (level 3 inspectors) and a reluctance to carry out BSA PD and PC roles.
Might the construction industry take its foot off the BSA accelerator, whilst it waits to see what the Government will do about the Grenfell 2 report?
It should not because the BSA is already enacted law which must be complied with to avoid enforcement and sanctions. It will be no defence for a defaulting party to say that they were waiting to see if any changes are going to be made in the light of that report. Unless and until there are any legislative changes it is necessary to comply with the current law and regulations.
Has the BSA changed insurers outlook on design in the construction industry?
In the years following the Grenfell tower tragedy in 2017, the professional indemnity insurance market underwent price increases. This began to subside at the start of 2023 because of increased competition among insurers and led to more competitive premiums and relaxation in limitations on coverage for fire safety. The BSA has given insurers more confidence that the perceived systemic fire safety design issues within the construction industry, are to be more closely regulated. However, the BSA does present areas that may increase the scope of liability assumed by construction organisations as well as increasing the focus on accountability. Together these could lead to a more volatile claims environment. Given the long tail nature of professional indemnity claims from first being made to final settlement, it will take some time before the full effect of the changes is felt by insurers and that effect considered in policy terms and prices.
(We thank Paddy Synnott from Miller Insurance for the above answer).
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